Google Innovation Strategy X Labs

How to Improve Your Innovation Strategy

‘I would rather make the mistake of moving too fast than make no mistake and move too slow’ – Larry Page, Google’s CEO

Despite a plethora of business literature on how to improve innovation strategy, it remains an elusive endeavor for many executives.

Strategic advice ranges from how to come up with better ideas (e.g. opened innovation, crowdsourcing, etc), how to set it up (e.g. cross-functional teams, separate exploratory units, etc), how to establish funding mechanisms (e.g. venture capital arms, separate funding, etc), how to sharpen execution (rapid prototyping, gate-funding, etc) to name just a few – but all assume that all businesses face the same obstacles.

Innovation in reality

In reality, any improvements to innovation are contingent upon company-specific factors to be identified first before ways can be developed to address them. Such factors include the magnitude of the technological opportunity, the intensity of competition, the growth in core markets or the degree to which customer needs are being met, just to name a few.

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Despite the absence of a universal magic formula, a company that has set innovation as its modus operandi, Google, can still provide us with four top ‘must-dos’ applicable to all, regardless of the unique challenges and starting position of each individual business

ONE: You must be able to articulate your innovation strategy

Have an innovation strategy that articulates how the company will build and maintain its innovation capacity to support the forward-looking strategic aspirations of its business. It also gives direction for the balance and mix of innovation efforts to include incremental innovation, technological innovation or business model innovation.

This helps the business acknowledge the need to explore new opportunities and achieve breakthrough innovation for growth while exploiting and steadily improving existing capabilities for profit – a common failure for many businesses.

Google has a very unambiguous innovation strategy – “Through innovation and iteration, we aim to take things that work well and improve upon them in unexpected ways.” As a result, its innovation investments have always ranged from the routine innovation in its core advertising business to making exploratory investments in speculative projects such as Google Glass or a driverless car.

TWO: Keep your customers needs in mind

Start with customers needs, it being current customers or a customer base in an entirely new market that has yet to be clearly defined.

This means understanding what customers want and what they expect, as well as defining clearly the problem and the type of value the innovation will create.

The failure of Google Glass (despite a textbook digital marketing strategy) was the result of a lack of focus on customers wants and on what the product would enable them to do. This visionary product only seemed to reinforce the status quo and was not socially, economically or culturally revolutionary or even just cool enough.

THREE: Remember! Innovation is about exploring new ideas

Establish an exploratory mindset in the organization to foster risk-taking, tolerate failure (including making sure that leaders of aborted projects are not penalized), and challenge the status quo even when the company is successful. Innovation does not exist without experimentation and related failure. In the case of Google, it could be labeled ‘try-anything’ innovativeness.

Experiments range from Google X Labs, which incubates top-secret R&D projects to all employees who are allowed to spend 20% of their time on personal projects. The ‘20% rule’ has resulted in products such as AdSense, Gmail, and Google News, as well as many others that did not see the light of the day.

The teething issues of Google’s AdWords engine were famously resolved over a weekend after Larry Page left a written note ‘These ads suck’ in the kitchen thereby offering all his engineers a difficult and interesting problem, confident that the best-placed person would be able to solve it and want to accept the challenge.

FOUR: Be flexible with your resource allocation

Continuously move resources between incremental and more radical innovation initiatives as demand needs shift. This may tilt investments in favor of the core business at one moment, and soon thereafter ring-fence funds for radical initiatives but it will facilitate strategic experimentation.

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Google continuously measures outcomes and, on the basis of the results, rapidly reallocates resources among projects. It has implemented a quarterly review process that examines the performance of all core products and speculative projects against three measures: what they did in the previous 90 days and forecasts for the next 90 days, their medium-term financial trajectory (and related requirements), and their strategic positioning in the context of a fast-changing landscape.

Over the past 10 years, Google has both launched and killed roughly 10 to 15 products annually and its resulting portfolio is a balanced mixture of relatively mature businesses such as AdWords and AdSense, rapidly growing products such as Android, and more nascent ones such the driverless car.

Google’s innovation strategy of exploring a broad range of options both close to and distant from its core business is clearly not for everyone. But there is no denial that the above four should be the linchpin of any business aiming to improve its innovation power regardless of its starting position.